Correlation Between Transcontinental and IGM Financial
Can any of the company-specific risk be diversified away by investing in both Transcontinental and IGM Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Transcontinental and IGM Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transcontinental and IGM Financial, you can compare the effects of market volatilities on Transcontinental and IGM Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Transcontinental with a short position of IGM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transcontinental and IGM Financial.
Diversification Opportunities for Transcontinental and IGM Financial
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Transcontinental and IGM is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Transcontinental and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial and Transcontinental is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Transcontinental are associated (or correlated) with IGM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Financial has no effect on the direction of Transcontinental i.e., Transcontinental and IGM Financial go up and down completely randomly.
Pair Corralation between Transcontinental and IGM Financial
Assuming the 90 days trading horizon Transcontinental is expected to under-perform the IGM Financial. But the stock apears to be less risky and, when comparing its historical volatility, Transcontinental is 1.28 times less risky than IGM Financial. The stock trades about -0.21 of its potential returns per unit of risk. The IGM Financial is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 4,269 in IGM Financial on August 29, 2024 and sell it today you would earn a total of 453.00 from holding IGM Financial or generate 10.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transcontinental vs. IGM Financial
Performance |
| Timeline |
| Transcontinental |
| IGM Financial |
Transcontinental and IGM Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transcontinental and IGM Financial
The main advantage of trading using opposite Transcontinental and IGM Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transcontinental position performs unexpectedly, IGM Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IGM Financial will offset losses from the drop in IGM Financial's long position.| Transcontinental vs. First Majestic Silver | Transcontinental vs. Ivanhoe Energy | Transcontinental vs. Orezone Gold Corp | Transcontinental vs. Faraday Copper Corp |
| IGM Financial vs. CI Financial Corp | IGM Financial vs. Great West Lifeco | IGM Financial vs. iA Financial | IGM Financial vs. Power |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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